Goods and Services Tax: Frequency of Fund-raising Events Determination (No. 31) 2016

Overview

The Goods and Services Tax: Frequency of Fund-raising Events Determination (No. 31) 2016 was enacted to address the need for clear guidelines on the frequency of fund-raising events that can be held by endorsed charities, gift-deductible entities, and government schools before they lose their eligibility to treat supplies from such events as input taxed. This determination was made under subsection 40-165(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and is a legislative instrument under the Legislative Instruments Act 2003. The policy objective was to establish a clear threshold for the number of events that can be held without the activities being considered part of a series or regular run of similar events, thus maintaining the integrity of the input tax credit system for these entities. The determination set a maximum of fifteen fund-raising events per financial year, replacing the previous determination from 2001, and was considered minor or machinery in nature, with no substantive changes to the law, thus avoiding the need for consultation.

Scope and Application

The Goods and Services Tax: Frequency of Fund-raising Events Determination (No. 31) 2016, made under subsection 40-165(4) of the A New Tax System (Goods and Services Tax) Act 1999, applies to endorsed charities, gift-deductible entities, and government schools by setting a limit on the number of fund-raising events they can hold annually. Specifically, these entities are permitted to hold up to fifteen fund-raising events in any financial year before they lose the eligibility to treat supplies from these events as input taxed. The determination establishes a clear threshold to ensure that such events do not form part of a series or regular run of similar events, thus maintaining the integrity of the tax system. It applies nationally, encompassing all such entities within Australia, and has a direct impact on their compliance with GST regulations. This legislative instrument does not impose any substantive changes from its predecessor and is considered minor or machinery in nature, thereby not requiring consultation. Any further specifications or adjustments to this determination can be made through subordinate instruments under the authority granted by the GST Act.

Key Provisions

The Goods and Services Tax: Frequency of Fund-raising Events Determination (No. 31) 2016 (the Determination) sets out the maximum number of fund-raising events that endorsed charities, gift-deductible entities, and government schools can hold in a financial year before they lose the ability to treat supplies from these events as input taxed under section 40-160 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act). Specifically, the Determination provides that an endorsed charity, gift-deductible entity, or government school can hold up to fifteen fund-raising events in any financial year without their events forming part of a series or regular run of like events (subsection 40-165(1) of the GST Act). Any event beyond the fifteenth in a financial year will not be eligible for the input tax election, thus requiring the entities to account for GST on supplies from such events. The Determination imposes clear limits on the frequency of fund-raising events for eligible entities to ensure that these entities do not use the input tax election as a means of avoiding GST on commercial activities disguised as fund-raising. Endorsed charities, gift-deductible entities, and government schools must keep track of the number of fund-raising events they hold each financial year to ensure they do not exceed the fifteen-event limit. Failure to comply with this limit would mean that the supplies from events beyond the fifteenth are subject to GST, which could significantly impact their financial planning and budgeting. Breaching the limit set by the Determination can have significant consequences for the entities involved. While the Determination itself does not explicitly state penalties, any failure to comply with the GST Act, including the provisions related to the input tax election, can result in civil or criminal penalties. For example, under section 164-1 of the GST Act, an entity that knowingly or negligently makes a false or misleading statement for the purposes of claiming an input tax credit can face a penalty of up to 100 penalty units, or in the case of a corporation, up to 500 penalty units. Additionally, ongoing non-compliance or failure to correct the breach within the specified time can lead to further penalties and interest on unpaid GST. Therefore, entities must ensure strict adherence to the event frequency limits to avoid these consequences.